Indian IT advises employees caution as Israel-Palestine conflict flares up

Indian information technology (IT) companies are turning cautious as tensions are escalating in West Asia amid the Israel-Palestine war.

Although Israel and Palestine are not significant hubs for IT companies, West Asia is an emerging area and adversities could affect existing and potential business prospects.
In Israel, Bengaluru-based firm Wipro has about 80 employees, all of whom are nationals of that country.

“We are advising employees in (that) country to work from home until further notice and follow the safety measures put in place by the local government. We are monitoring the situation closely and are ready to activate business continuity plans should there be a further escalation of events,” Wipro told Business Standard in a statement.

While Wipro does not give its “Middle East” (West Asia) revenues separately, the APMEA (Asia-Pacific, Middle East and Africa) business contributed 11.8 per cent of the total during FY23.

Wipro Chief Executive Officer (CEO) Thierry Delaporte said during the Q1 earnings bookings in contract value terms for the APMEA business were “looking healthy”, with 23 per cent quarter-on-quarter growth. Within the APMEA, the India business grew 7 per cent and the Middle East business 6.4 per cent Y-o-Y during the first quarter (Q1).

In 2016, Wipro Infrastructure Engineering acquired Israel-based HR Givon, supplier of metallic parts and assemblies to the aerospace industry, in an all-cash deal.

For Tata Consultancy Services (TCS), the Middle East and Africa constituted 1.5 per cent of its revenues in FY23. Among emerging markets, Latin America grew 24.8 per cent, India 14.9 per cent, the Middle East and Africa 12.5 per cent, and the Asia-Pacific 7.1 per cent, according to the firms FY23 Annual Report.

Revenues for the financial year from the Middle East and Africa stood at Rs 4,283 crore.

In 2013, TCS had launched an all-women business process management (BPM) centre in Riyadh, and that has the target to expand to 3,000 in three years. According to the TCS website, the company has over 9,000 employees in the United Arab Emirates (UAE), Saudi Arabia, and South Africa, and works with over 150 clients.

For Infosys, the Middle East, including Israel, comes under the “rest of world” category, which contributed 9.4 per cent to its revenues during the first quarter and grew 3.4 per cent Y-o-Y in constant currency.

In 2012, Infosys signed a memorandum of understanding (MoU) with Israel to establish and enhance cooperation in industrial research and development.

Analysts say the impact will be limited because IT companies do not have a significant presence in West Asia.

“IT companies do not have a large presence there either in terms of market and team. So, the impact of the war will be minimal. But West Asia is an emerging economy. If the war situation continues long, it can have some adverse impact,” an IT analyst with a leading brokerage firm said.

The implications for the Indian IT sector would largely hinge on the scale, duration, and international reactions to the conflict, said Sid Pai, IT consultant and founder of Siana Capital.

“Hamas operates primarily in the Gaza Strip and has had numerous confrontations with Israel in the past, so the effects might be more localised than a broader Arab-Israel conflict. Some spillover effects such as oil prices increases and a slight hesitancy from buyers may (be there), but I expect (those) will be contained. If the conflict were to escalate, we will have a more dire situation,” Pai said.

Noida-based HCLTech too has a huge presence in the Middle East. Since 2017, the region has been classified as a “high-focus” one for HCLTech. The company works with over 50 clients in the region and more than 700 professionals are employed there, said the company’s website.

SaaS unicorn Zoho’s CEO Sridhar Vembu has raised concern about the ongoing Israel-Palestine war and indicated that the conflict could have an adverse impact on the global economy, potentially affecting the company’s growth.

IT industry body Nasscom has condemned the act of terrorism on Israel.

“The industry has advised employees to stay in touch with the local consulates and follow all necessary precautions,” Nasscom said in a statement.

An email sent to TCS, Infosys, and HCLTech on the escalating tension in the region and its impact on operations remained unanswered. Business Standard